Walker's World: The Italian mess

BRUSSELS, Feb. 25 (UPI) -- There is a significant chance that by this time next week the world could be back in the throes of a full-blooded financial crisis.

The Italian election result could make the eurozone's third-largest economy look ungovernable just as the sequestration drama is doing the same for Washington. These may be problems of politics rather than of economics but in a world in which where market confidence is itself a crucial commodity, political dysfunction can lead to financial disaster.

We are unlikely to know that the precise components of the next Italian government until the votes are counted and the coalition negotiations are complete. Other European leaders, hoping for stability, are praying for a stable majority of the center-left in coalition with the technocrats of outgoing Prime Minister Mario Monti. That may be the result in the popular assembly but the upper house of the Italian Parliament looks much more problematic.

It is important to understand why. The reason is that Italian politics have never recovered from the early days of the Cold War and have never managed to evolve into the stable two-party system of left and right that is the pattern in most democracies.

From 1924 until the closing years of World War II Italy was ruled by the fascist Benito Mussolini. When his regime collapsed, the Communists were the largest and best-organized party and as the Cold War got under way, the prospect of Italians freely voting a Communist government into power was very real. Much of the local political power was in their hands, thanks to their leading role in the anti-fascist partisan movement.

It became a top priority of British and U.S. policy, and thus of the fledgling CIA, to prevent Italy going Communist. The fear was that France might follow Italy and that the red flag could fly over Western Europe and the whole Mediterranean.

The stakes were high. George F. Kennan, head of Policy Planning at the U.S. State Department, and its representative on the newly coined National Security Council, even suggested military occupation of Italy if it looked like going Communist in the 1948 elections.

The means chosen were simple; oceans of cash to help build anti-communist political parties, labor unions and newspapers. We know from the memoirs of William Colby, CIA station chief in Rome in the 1950s, that one of his biggest problems was finding Italian cars with trunks big enough to carry the vast wads of lire he routinely distributed to defeat the reds.

The strategy also required the closest cooperation with the Vatican and the Roman Catholic church, seen as the essential bulwark against the godless communists. It also meant accepting that another useful ally against the Communists, particularly in the south, would be the Mafia. The result was that the church, the Mafia and financial corruption thus became woven into the Christian Democratic Party from the beginning.

When the Cold War ended and Italy's dwindling ranks of communists began breaking apart into more or less moderate left-wing parties, the dominant Christian Democrats also collapsed under the massive scandal known in Italy as tangentopoli. This exposed the Mafia links of prime ministers, the tangled finances of the Vatican bank and discredited much of Italy's political establishment, a context that helps illuminate the extremism of the violent revolutionary tactics of the Red Brigades.

For the past two decades, Italy has been trying to construct a new political system from this ruin. It now has a center-left party but with influential far left groups on its flank. The church has been further discredited by the pedophile scandals.

The right is divided between the Liga Nord which seeks more autonomy or even independence for the more prosperous northern regions, the reformed fascist party which still looks back to Mussolini and the various parties founded by former Prime Minister Silvio Berlusconi and based on his dominance of Italy's media. Discredited by the sex and corruption scandals that swirl around him, including the forthcoming criminal trial for having sex with an under-age prostitute, Berlusconi remains the leading standard bearer of the center-right.

Berlusconi has recast himself as a critic of the European Union, arguing that it has become a German-dominated system that requires too high a price from Italy for the survival of the euro currency. In this Berlusconi makes common cause with the former comedian Beppe Grillo, whose grassroots M5S (Five Star Movement) is based on disgust with the whole political system but could yet hold the balance of political power.

This isn't a political system designed to cope with the severe challenges of recession and debt that face Italy. But the stability of the euro and the European Union are among the stakes in this election and with them go the prospects of a new global financial crisis. We may all yet pay a stiff price for saving Italy from communism in the Cold War.

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